Ukraine's state budget has run short of cash. On Monday 12 October Finance Minister Serhiy Marchenko told the Verkhovna Rada that budget VAT refunds of UAH 18 billion to businesses have been suspended, about UAH 39 billion of payments have been pushed to the end of the year, and UAH 46 billion of payments sit unprocessed on the single treasury account. Only defence, pensions, wages and social assistance are being financed. According to minfin.com.ua, he also said Ukraine still has to receive almost $27 billion from partners before the year ends, and part of that money depends on laws the Rada has not yet passed.
This is the second step of the squeeze our analysts described in September, when the Ministry of Finance froze capital spending and moved UAH 39 billion to December. The difference now is that the cuts have reached private companies directly, through the VAT account.
What exactly was stopped
The numbers come from Marchenko's address to the Rada, as reported by Interfax-Ukraine and Ukrinform:
- UAH 18 billion of budget VAT refunds suspended. MP Yaroslav Zhelezniak put the figure at about UAH 17 billion; Danylo Hetmantsev, head of the Rada finance committee, said businesses had gone three weeks without refunds.
- About UAH 39 billion of payments deferred to the end of the year.
- UAH 46 billion of unprocessed payments on the single treasury account: road repairs, school buses, housing repairs, heating-season preparation and backup power.
- About UAH 50 billion of general-fund revenue missed in January–September, UAH 32 billion of it in August and September alone.
- More than UAH 70 billion of tax and customs revenue expected to be lost for the full year.
A State Tax Service clarification dated 5 October gives the legal basis: refunds are paid only within the funds available on the single treasury account. In other words, the refund is still owed, but it waits in the queue behind the army and pensions.
Why the money is missing: $27 billion and the laws behind it
Marchenko said Ukraine had planned on about $4.5 billion a month of partner budget support in 2026 and received about $1.5 billion on average. Monthly inflows were $2.4 billion in January, $1.5 billion in February, $1.7 billion in March, $1.3 billion in April, $0.5 billion in May and $11.3 billion in June, when a large EU payment arrived. He estimated the budget has already missed $29.5 billion of support because Ukraine did not meet its commitments on time, including $4.25 billion of macro-financial assistance expected in August and September.
The status of each external source, as of 13 October:
- EU. According to LB.ua, Marchenko said Ukraine has received €10 billion from the EU this year and expects another €17 billion by year-end. On 2 October the European Commission paid the eighth Ukraine Facility tranche of €2.9 billion, of which €800 million came for the first time from the Ukraine Support Loan. Ukrinform reports that €33.7 billion of EU money remains available to Ukraine until the end of 2026, more than €17 billion of it as direct budget support, conditional on reforms.
- The €90 billion loan. The EU agreed it at the end of 2025 to cover most of Ukraine's needs in 2026–2027, with up to €45 billion a year subject to reform milestones. On 3 October Forbes Ukraine, citing the Financial Times, reported that Brussels refused Kyiv's request to bring forward 2027 money and pointed instead to about €34 billion that reforms could unlock in 2026.
- IMF. The four-year Extended Fund Facility of $8.1 billion was approved in February. The first review in July released about $690 million. The September mission ended without a staff-level agreement on the second review, worth about $692 million, because the tax on international parcels had not been passed. The next IMF mission is expected in November, and Marchenko said the 2027 financing has to be confirmed before it.
- Frozen Russian assets. On 12 October EU foreign policy chief Kaja Kallas said many ministers again named the immobilised assets as a way to cover Ukraine's 2027 gap. It is a discussion, not a decision.
The list of laws is specific: VAT on parcels from foreign marketplaces, new VAT administration rules, joining SEPA, bank secrecy disclosure, the Accounting Chamber appointments and a property valuation bill. Forbes Ukraine counts more than 30 bills that must pass by mid-November, eight of them this week. Hetmantsev said that, at best, VAT refunds would resume in two to three weeks if the Rada votes the EU commitments tied to €4 billion.
What it means for exporters
VAT refunds matter most to exporters. Grain and oilseed traders, crushers, steel and iron-ore producers sell abroad at a 0% VAT rate but pay 20% VAT on fuel, electricity, logistics and inputs at home. The refund is how that money comes back. When it stops, the VAT paid becomes an interest-free loan to the state.
A company that cannot get its refund either borrows in hryvnia, with the National Bank of Ukraine key rate at 16%, or slows purchases and payments to suppliers. For agricultural exporters in harvest season the timing is poor: input costs were paid in spring and summer. In analyst Ruslan Averin's view, the risk for business is less the amount itself than the precedent. Once refunds become a budget buffer, companies start pricing a delay into every export contract.
The hryvnia and OVDP
The currency is already under pressure. The official rate hit a record weak 45.0564 per dollar on 6 October; for 13 October the National Bank set it at UAH 44.95. Last week the NBU sold $1,248.8 million on the interbank market. The balance of payments ran a deficit of $9.66 billion in January–August, the worst for that period since at least 2010, and annual inflation reached 10% in September.
Every month of delayed partner money means the National Bank defends the hryvnia with a thinner reserve cushion. Exporters who wait for VAT refunds have less hryvnia liquidity and may sell more foreign currency to pay bills, which supports the rate in the short run.
The bond market is the other channel. The ministry says the 2026 domestic borrowing plan is practically fulfilled, and it cut the offer at the 13 October auctions to UAH 2 billion, after offering UAH 5 billion a week earlier and selling UAH 2.2 billion. In September military bonds maturing in September 2027 sold at weighted average yields of 15.16–15.18%. With the key rate at 16% and inflation at 10%, the real yield on hryvnia OVDP is about five percentage points. Less supply from the ministry keeps auction yields from rising for now. If external money slips past year-end and the budget has to borrow more at home, yields would have to rise to attract banks, which hold UAH 917.9 billion of the UAH 1,994.1 billion outstanding.
Budget 2027: the same arithmetic, bigger
The draft 2027 budget, submitted on 15 September, has revenue of UAH 5.648 trillion, including UAH 2.493 trillion from the EU and other donors, spending of UAH 7.271 trillion and a deficit of UAH 1.623 trillion. Defence and security take UAH 4.885 trillion, or 43.8% of GDP. It assumes an exchange rate of 48.3 per dollar at the end of 2027 and inflation of 8%. External financing needed is $52.6 billion, of which $32.6 billion is not yet confirmed.
The October episode shows how that budget behaves when donor money is late: defence and social payments are protected, and businesses, roads and municipalities wait. Our analysts would watch three lines over the next four weeks: whether the Rada passes the parcel tax and VAT administration bills, whether VAT refunds restart by early November, and whether the IMF mission in November gets the 2027 financing confirmed.
Related: September's capital spending freeze, the dollar at 45 hryvnias and inflation at 10% and OVDP yields.